Union Music Ltd v Watson [2004] B.C.C. 37

Court: Court of Appeal

Facts: A shareholders’ agreement for Union Music Ltd required that a quorum for any meeting of shareholders be achieved only if all shareholders were present. The minority shareholders, Mr and Mrs Watson, refused to attend a meeting to appoint a new director. The majority shareholder sought an order under section 371 of the Companies Act 1986 (now section 306 of the Companies Act 2006) to convene a general meeting with a different quorum requirement.

Held (Court of Appeal): The appeal was allowed. The Court held that the contractual provision requiring all shareholders to be present did not constitute a class right, and thus the court could exercise its power to convene a general meeting under section 306. The provision was seen as a quorum requirement rather than a substantive class right.

Key Judicial Statement: Peter Gibson LJ observed, “Clause 6.1.18, however, seems to me more in the nature of a quorum provision than a provision for a class right, which it plainly was not, or a substantive right.”

💡 Leveluplaw: The court can use its powers to convene a general meeting to overcome impractical quorum provisions if those provisions do not protect a specific class of shareholders but are merely procedural.